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Credit Repair Tips

There's nothing more frustrating than wanting to buy a home and finding out your credit isn't where it needs to be. Comments such as 'your score is too low' or 'you have too many collections' aren't exactly helpful when there's no follow up dialogue on how to correct these matters. Fortunately, I can help with this and am going to share with you a couple of quick tips on credit, and steps needed to get you moving in the right direction.

Before we get into that there's one extremely important thing you need to know. DO NOT under any circumstances hire a 'credit repair company'. You can fix your credit yourself for free and you can do so much faster and these so-called credit repair companies can. I don't care how good their offer sounds, do not pay money to anyone for this it's a total waste of time and your hard-earned money.

In order to repair your credit to prepare for a mortgage you need to know how credit is built, maintained and scored. Let's jump right in:

Installment Loans are things like car payments and signature loans. They have a fixed monthly payment for a fixed term. The credit bureaus rate you on installment loans based on your payment history. The longer you pay this monthly payment on time, the better the credit bureaus like it, and improve your score accordingly.

Revolving debts are your credit cards. With revolving debt you are rated on TWO different things , payment history and credit utilization. Paying your credit card payments on time, every time builds up your positive history and raises your score. How you use your credit card is also important. The higher your balance is in relation to your credit limit, the lower your score goes. If you have a $1000 credit limit and you keep your balance at around $900 or so your score will suffer as you are 'utilizing' all of your available credit and are hence considered risky. As a general rule if you can keep your credit card balances at 50% or less than your available limit, you'll see the benefits in your credit scores.

Collections are accounts you haven't paid and the original creditor has sold your account to a collection company. Collection companies are VERY aggressive and are going to harass you for years on end wanting their money. What's most damaging about collection companies though is how they report your debt. Collection companies report your $100 medical bill each and every month as if it were a brand-new account. Since a recent negative mark on your credit report causes the most damage, you're going to see your credit score suffer greatly if these are not taken care of. I've worked with plenty of clients who should've had a 700 score, but instead had scores in the 500 range thanks to one or two $100 medical collections.

Credit depth is also important. Having a mix of credit types is incredibly helpful. If you only have one credit card you're not going to obtain the great score your looking for very quickly. But, if you have a couple of them along with various installment accounts your credit profile will build super-fast if everything is paid on time.

If you're wanting to buy or refinance your home but are concerned with your credit, please just contact me. I can pull your credit and prepare for you, FOR FREE, a personalized write up on steps you need to take in order to bring your credit file in line to prepare for your mortgage loan. And, when you're ready to move forward on your loan, I'll give you a $500 credit at closing to be applied towards your closing costs.

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